Portfolio Management¶

Note: We assume Gaussian distribution of returns. If return series is non-gaussian, then you may need to evaluate differently

Portfolio¶

Pool of securities combined such that

• Maximizes expected returns
• Minimizes unsystematic risk

Portfolio¶

Let \(W\) be the matrix of fraction of all investments $$ \begin{aligned} R_p &= \sum_i w_i r \ \sigma^2_p &= w' \Sigma w \ \sum_i w_i &= 1 \end{aligned} $$

\(w_i<0 \implies\) Loan

Types of Portfolios¶

Benchmark¶

• 60% Equity, 40% Bonds

IDK¶

Nifty50 makes a 12% average return, but actually, entire pool of Indian stock market makes a negative return

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